3.1 ROM's will eventually be a must for 3.5 or better, but I wouldn't worry about that until you get an accellerator and more memory(I think 3.5 needs a few megs of fastram).
3.5 will run somewhat with 3.0 roms, but you will need 3.1 for full compatability.
OS 3.0 is actually a very usable OS for the machine you will be running it on, despite a few annoying quirks. Using less colors on the WB will help keep the speed up until you upgrade. I bought a stock 1200 in Feb. and used it with nothing more than a hard drive until just recently, and I thought it did a fabulous job considering its resourses!